Chapman v. Colby Bros.

Campbell, J. Defendant in error, claiming to be a Vermont private corporation, recovered judgment against Chapman in the Hillsdale circuit court for money advanced to him, and not repaid either in cash or in real estate, as it is claimed he was to repay it. The declaration described the plaintiffs below as incorporated under a statute referred to, and contained the common counts, and no special count. The facts out of which the transaction sued on arose, so far as now material, were as follows: In October, 18Y1, an agreement was executed in Beading, Hillsdale county, by a number of parties, including Chapman, whereby, in consideration of an agreement by the corporation to transfer to Beading “ the business now earned on by them in Vermont, with the capital now employed by them in said business in Vermont and New York city,” the subscribers agreed to pay for the use and benefit of the corporation the sums respectively subscribed (Chapman’s subscription being $2000), upon these conditions. Nothing was to be paid until the subscriptions reached $20,000, and then the subscribers were to choose a [49] committee to receive and apply the money on conditions to be agreed upon with the corporation; one of which was to be indispensable, namely, that all the subscribed fund should be invested in real estate and improvements for manufacturing purposes in Reading. Chapman had at first made his subscription payable in lands, but' this not being consented to by the other subscribers, he made it payable in money. It is claimed, however, that some of these conditions were waived, and this was for the jury. Immediately afterwards, and by a private arrangement, the corporation agreed with Chapman to advance him the money to pay his subscription as fast as called for, and to accept from him lands at prices marked on a plat of lots in an addition to Reading. The president of the company testified that he had agreed in advance to do this, and the written agreement, which" was in Chapman’s handwriting, was signed for the corporation by the president, and is the basis of the recovery in this case. The subscribed fund was invested by the committee in land and improvements which the corporation received the benefit of. There was a good deal of testimony in the case tending to show fraud and insolvency in the corporation, and dealings with and by various parties negativing the performance of the conditions in favor of the subscribers. The agreement of the corporation, among other things, provided for establishing business in Reading with a fully paid up stock of $60,000, which they might increase to $100,000. There was evidence tending to show that the capital was greatly reduced if not exhausted. The corporation furnished Chapman the amounts required to fill his subscription as called for, and he refused to convey lots for various reasons connected with outstanding equities or counter-claims, which need not be recited. On the trial the corporation failed to prove the law under which it was incorporated, the court below raling that it was not bound to show it. Much of the discussion rests on this omission, which we think was fatal. [50] If the objection rested merely on a failure to prove corporate character, it would have been obviated by the dealings of the parties recognizing it. The question was not whether it was a corporation, but whether it had certain powers and privileges which do not arise necessarily from corporate existence, but depend on the franchises bestowed on the corporation, which measure its powers. The money advanced by the corporation to Chapman was advanced to be paid into a fund of which it was to have and did have the benefit. Chapman paid it where it was authorized and expected to be paid, and derived no personal benefit by it beyond what was to be obtained from the performance by the corporation of its agreement with the subscribers. It is impossible to divest the transaction of its real character, as one wherein the consideration for Chapman’s repayment of their advances was the fulfillment of their agreement on the faith of which this subscription was based. That agreement involved the power and right of a Yermont corporation to remove its corporate existence for all valuable purposes to Michigan from Yermont, and to locate its landed possessions and carry on the business for which it was created, in this ■State, as well as to enter into some other arrangements involved in these transactions, including some new organizations. It therefore became necessary to know in the first place what were its corporate powers, and in the second place whether they could be transferred. For until this appeared there was no consideration for the subscription. It is provided by our statutes that when any act is forbidden to be done by a corporation without express authority of law, and such act is done by a foreign corporation, no action- can be maintained by the corporation founded upon such act, or any liability or obligation express or implied arising out of or made in consideration of such act. 2 Comp. L. § 6513. It has been uniformly held in this State that corporations cannot remove from place to placo, or establish branches for the transaction of their regular corporate business, unless [51] authorized by law. People v. Oakland County Bank 1 Doug. 282; People v. Aud. Gen. 11 Mich. 161; Underwood v. Waldron 12 Mich. 13; Detroit F. & M. Ins. Co. v. Judge of Saginaw Circuit 23 Mich. 492. It is also equally Avell settled that the power to acquire .and hold real estate is not allowed to private corporations ■except under prescribed conditions, and that transactions which are in violation of those conditions cannot be maintained. And in general the same principle is extended to prevent them from going into business or doing acts not fairly within the extent of their granted powers. People v. River Raisin & Lake Erie R. R. 12 Mich. 389; Orr v. Lacey 2 Doug. 230; Bank of Michigan v. Niles 1 Doug. 401. It Aras held in- Thompson v. Waters 25 Mich. 214, that * where a foreign corporation was authorized to take lands under certain circumstances by its charter, such taking Avould be held valid in this State unless we had some kw to -the contrary. But the corporate charter is the source of all the power Avhich the artificial person possesses, and no one ■can tell for what purposes or to what extent its powers exist, until that charter is shown. Under our laws the courts take judicial notice of all statutes, and when they know under what law a corporation exists they know its powers and their ■limitations. People v. River Raisin & L. E. R. R. Co. 12 Mich. 389. But where a foreign law is in question there -can be nothing known of its purport until it is proved. Kermott v. Ayer 11 Mich. 181. The power to take lands is not the most important one involved in this case, although ■somewhat prominent in connection with some others. We think that until the Yermont law or charter is pro■duced, it is impossible for court or jury to know whether the agreements and considerations on which the rights and liabilities of the parties depend, are legally sufficient; and it was error to hold otherwise. We have already intimated further that all the transactions between Chapman and the company in regard to the making and the substituted payment of the subscription, [52] and the consideration and agreements moving from the company, must be construed together in determining their respective obligations. We do not deem it necessary to consider the questions arising on the pleadings, as the plaintiff below can amend them by inserting special counts. The important questions-likely to arise come chiefly within the principles already discussed, and it would not be wise to anticipate difficulties-which may never arise. Judgment must be reversed with costs, and a now trial ordered. The other Justices concurred